I recently met a lady who had lived in California for 22 years, moved to Maryland four years ago, and was now planning on spending three to four months of the year in Israel.

She had multiple investment accounts; some with online brokers and one with a portfolio management firm. She had a trusted friend who has served as her unofficial adviser for years but had retired and was no longer interested in volunteering his services. She was very sharp and knew what she wanted, and how to allocate her investments, but felt that since she had multiple accounts, in multiple cities, and that she was spending a third of the year abroad, she needed someone to sort of sit above everything and act as her own CFO.

She wanted someone to make sure that all the accounts were doing what they were supposed to be doing and when taken together, had the proper allocation for her. She also had some real-estate holdings back in California that she wanted to be factored in to her whole financial picture.

Fee-based consulting

I advised her to meet with a fee-based adviser back in Maryland. Why? Many investment advisers have started offering consulting services to their clients. The client pays the adviser an hourly fee for a consultation on his entire investment portfolio. The adviser analyzes any stocks, bonds, mutual funds and even real estate that the client is holding.

To give objective advice on these holdings, the adviser also needs to gather a thorough understanding of the client's risk profile and short- and long-term goals. As the adviser is compensated by an hourly fee, fee-only advisers can be expected to practice a greater degree of objectivity. They have no financial interest in pumping high-commission based product.

Objective advice

Precisely because a fee-only adviser is paid at an hourly rate only, the primary benefit of using one is that he or she can provide objective advice. They are better able to look at your entire financial situation without being swayed by any personal benefits that may come with giving certain recommendations. In fact, most of these advisers will provide free referrals to other professionals that the client may need (such as accountants or lawyers).

You don’t have to be rich

There’s a common myth that to get top-level service in the financial industry, you need to have millions of dollars before anyone will pay attention to you. The beauty of fee-based consulting is that this levels the playing field. The adviser charges the same hourly fee for a multimilliionaire as he would charge for a newly married couple with limited financial means. That same new couple will receive the same level of attention as anyone else, because it makes no difference to the adviser. No matter who he is working with, he will always make the same amount of money from the hourly fee.

401(k)

With certain types of retirement accounts, the investor needs to make investment choices. However, as this money may be locked up, it cannot be moved into a normal brokerage account. In many cases, the investor loses substantial amounts of money because these funds weren't invested correctly.

Many investors with such accounts should seek the counsel of a fee-based adviser, and make sure that this retirement money is invested correctly.

Do-it-yourselfers

With the popularity of online investing, many people have taken it upon themselves to manage their own portfolios. While they enjoy managing their own money, many investors would like to receive supplementary advice, or a second opinion, to make sure that they are making proper decisions. Fee-based advisory services are the perfect solution for this problem.

The adviser will sit with the client and work on an allocation model with him, go over all potential investments, and then the client can go home and enter the trades himself, continuing to manage the portfolio on his own. Many fee-based advisers will send reminders to clients to come in for quarterly, semiannual or annual meetings to help keep the do-it-yourselfer on track.

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